Use These 4 Smart Money Moves to Pay Off Student Loans Faster

Student debt, especially for doctors and dentists, might seem intimidating. As you begin training or enter into practice, large debt can feel like a huge weight on your shoulders. Having limited time to think about strategy can leave you feeling stressed out.

If you’re thinking about applying for public service loan forgiveness (PSLF), your goal ount possible. This will ensure a higher forgiven balance. Some strategies like negotiating with an employer are straightforward, but overlooked. Other debt pay off strategies like taking advantage of the CARES act provisions are relatively new but still effective.

Always have an emergency fund

One of the most important big picture items to consider is your emergency fund. Ideally, you should have 3-6 months of net living expenses in a high-interest savings account. This will keep you afloat during unemployment and will help you tackle unexpected expenses like car repairs.

With an emergency fund, you might be able to have a higher monthly payment to pay off student loans quicker. Not so fast.

You should always consider your emergency fund when budgeting, refinancing, or planning for other financial goals. Not having this extra cash could leave you vulnerable during tough times. It might not let you achieve the financial goals you’ve been working towards.

If your income increases, consider allocating these extra funds toward your loans. When times get tough, you can choose not to make these extra payments.

Be sure that your emergency fund covers net survival expenses like rent/mortgage, food, clothing, health insurance/medical expenses, and your student loan payment. You can inquire about forbearance with your lender during tough times. However, you need to keep in mind that interest accrues during this period. This will cost you more over the long run.

Plan for other financial goals

Besides an emergency fund, there are other financial goals that you might want to consider. Some of these include saving for retirement or placing a down payment on a home. If you earn an additional bonus or income; while it may be tempting, refrain from putting it all towards your student loan payments.

Instead, allocate appropriate amounts towards these other goals. This might seem tough, but some tips for saving for multiple goals include:

• Break your goals into long-term and short-term goals

Breaking down your goals into manageable chunks will keep you on track to reach your long-term and short-term goals. Saving for retirement is a long-term goal while a common short-term goal could be saving for an auto loan down payment.

• Assess your needs vs. wants.

To plan for your financial goals, you have to weigh out your needs versus wants. Do you need a $30,000 car, when a $7,000 one would be sufficient? Do you need to go on a tropical beach vacation or could you use that money to help pay off your student loans?

• Automate your cash flow.

Automating cash flow helps lift the burden of manually having to deal with bills and other transactions. You can automate student loan payments, retirement account, and savings contributions, which can help you accomplish financial goals without having to think about them.

Re-evaluate your financial plan

Be sure to re-evaluate your student loans/financial strategy when necessary. Make any corrections if needed and don’t feel bad if you come short occasionally.

Having low debts can also help you with various financial goals including saving up for a downpayment on a home. A dilemma doctors often face is deciding to take a lump sum of cash and paying down (or off) student loans versus investing. There is not a one size fits all answer to this. It really depends on cash flow and other upcoming goals. For example: if you are planning for home renovations or want to build a house, it might make sense to hold onto cash because you will need it for a construction loan down payment.